What Are the Common Types of Small Business Loans?
Are you a small business owner struggling to keep your doors open this year? Do you need a small business loan, but you’re unsure which loan is right for you?
The first-year failure rate for small business startups is around 20 percent in the US. Right now, businesses can use all the help they can get.
Understanding the different types of small business loans available is essential. Here are some of the options available today.
Starting a Business
It can be challenging to get the funding you need to begin running a business when you are starting out. A startup loan can give you the money to rent a space and purchase the items you need to get started.
Interest rates may be a bit higher for this loan as it carries more risk, and you may need to sign a personal guarantee.
A Business Line of Credit
A line of credit is an essential source of short-term money for a small business. When you need to pay your payroll and can’t collect your accounts receivable, you can use the business line of credit to make your payments on time.
A line of credit usually doesn’t require collateral, but interest rates are higher, and there may be additional fees on drawing the money. Some businesses use a credit card as a short-term source of funds. You should pay both of them quickly, as they are the most expensive type of loan to carry.
When you need to purchase equipment for your business, you can borrow money to buy it. Equipment loans are similar to car loans. They are for a fixed term and require monthly payments. The equipment will be collateral for the loan, and the bank will take it if you don’t pay the loan.
These loans for businesses are a common form of financing. You receive a lump sum and pay it off with interest over some time. These are relatively easy to obtain if you have an established business with good credit.
Interest costs vary, and you may need to sign a personal guarantee to get the loan.
What Is the Small Business Administration Program?
The Small Business Administration (SBA) is a federal agency that helps small businesses get the financing they need to operate. They do this by guaranteeing a large part of your loan.
SBA loans have some of the lowest rates available, and they are suitable for a business that wants to refinance when paying off loans. They are one of the best business loans available if you can get one.
It can take a while to get an SBA loan, and there’s a lot of paperwork, but they can help you out if you are having trouble finding help otherwise. Find out more about the SBA 504 program here.
Select From Several Types of Small Business Loans
Now that you know more about the types of small business loans available, you will have a better idea of which one will work for your financing needs. It’s good to take the time to research, so you make a good decision.
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